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Something the coalition hasn't told uni student... Watch

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    For those of you who are complacent about getting a mortgage with an outstanding student debt of £40,000+ have a look at this from a contribution to today's issue of the Guardian about Nick Clegg and proposed student fees.

    Ancasta
    7 December 2010 9:25PM
    @HGAT:
    So, say you leave Uni and get a job which earns you enough to trigger your tuition fee debt repayment. Has anyone looked into how that debt will affect someone's credit rating (and therefore their ability to eg: buy a house or set up a business)?
    We recently applied for a mortgage. Our mortgage advisor neglected to take my husband's student loan into account, which we noticed and asked if it would affect the outcome of our application. 'No', we were told, and we were granted a mortgage in principle. We duly submitted our application, only for it to be turned down -- the student loan did, in fact, negatively affect the outcome of the application. We are able to borrow £8,000 less than we applied for, which is more than double my husband's total loan amount.
    Whilst the loan did not affect our credit rating, it significantly affected the amount we were considered able to afford to repay. Eight thousand pounds is a good deal of money, and quite a large percentage of what we wished to borrow (we live in the Midlands, and so house prices are reasonable).
    http://www.guardian.co.uk/education/...clegg-lib-dems

    So, one of the couple had a student loan of under £4,000...and the mortgage lender reduced the amount they were prepared to lend by £8,000!


    If one has a student loan of £40,000 outstanding and wants to purchase a house for say £200,000 (assuming they were able to meet the mortgage repayments) it is likely that the bank will only agree to lending a sum that is going to have a shortfall of £80,000 after paying a deposit.


    I have an acquaintance who is a 6th Form Head. He said last week that mortgage lenders would most probably reduce the amount they are prepared to lend by the amount of the individual's student loan. Here we see that his musings are too optimistic going by the poster's evidence. One might have to find more than twice the amount of the student loan in addition to say a 20% deposit to obtain a mortgage. No mean feat if one does not have very wealthy parents or is bequeathed a lot of money from grandmother's Will.
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    (Original post by yawn)
    For those of you who are complacent about getting a mortgage with an outstanding student debt of £40,000+ have a look at this from a contribution to today's issue of the Guardian about Nick Clegg and proposed student fees.

    [URL="http://www.guardian.co.uk/discussion/user/Ancasta"]
    http://www.guardian.co.uk/education/...clegg-lib-dems

    So, one of the couple had a student loan of under £4,000...and the mortgage lender reduced the amount they were prepared to lend by £8,000!
    OK, so one couple were affected in one case. It would be interesting to find out if it is just this one mortgage lender doing this (in which case you could just go elsewhere) or whether all of them are now doing it. It doesn't seem to be a particularly rational thing for a lender to do (others could then take their business by not reacting so disproportionately to a student loan).
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    (Original post by alex_hk90)
    OK, so one couple were affected in one case. It would be interesting to find out if it is just this one mortgage lender doing this (in which case you could just go elsewhere) or whether all of them are now doing it. It doesn't seem to be a particularly rational thing for a lender to do (others could then take their business by not reacting so disproportionately to a student loan).
    If you want to put your head in the sand and ignore the ominous rumblings then that's up to you, although of course, you won't be affected by it anyway...or maybe you will since the anecdotal evidence of two couples so far is that those who have graduated in the past and near times are being caught up in it too.

    I guess it's not so bad when times are not so bad...but since boom and bust is the nature of capitalism more graduates in the future might find that their big mortgages and big debts will end up as a yoke that chokes them, metaphorically speaking.
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    (Original post by yawn)
    If you want to put your head in the sand and ignore the ominous rumblings then that's up to you, although of course, you won't be affected by it anyway...or maybe you will since the anecdotal evidence of two couples so far is that those who have graduated in the past and near times are being caught up in it too.
    I don't think I'm putting my head in the sand, I just currently believe that student debt won't affect mortgage applications (which is what the government, the banks, and consumer sites like MoneySavingExpert and the like say), and require sufficient evidence to disprove this and change my opinion. You are right in that the increased fees won't affect me as I would've graduated by then (provided I pass this year of course), but I will be applying for a mortgage at some point (maybe in the next 5 years) so changes in the consideration of student debt is likely to affect me (I have borrowed the full amount for tuition and basic maintenance, so around £20,000 in total). Anecdotal evidence on such a small scale does not really concern me, official statements by mortgage lenders or regulators saying that student debt should be considered would concern me somewhat.
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    (Original post by stefk93)
    Firstly, students today still graduate with £25k+ of debt so surely it wont be a huge difference for future students. And has noone realised that american students are left with over 150k of debt once they graduate and how do they survive?
    Suck it up and stop whining
    It's exactly like sslazio said. US is a capitalist society. Pay up for good university education or live off community college and getting a scholarship for your professional degree. And UK universities are public, you are talking about the private American universities, there are public alternatives. Much cheaper.
    But on average cost of living is less in US, their wages are higher and most of all their debts DONT get wipped clean after 25 years!

    And if we raise tuition fees, it's not going to look more attractive for foreign American students to come here and study, especially considering the lack of job on graduation in the UK.
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    (Original post by yummychocolate)
    And if we raise tuition fees, it's not going to look more attractive for foreign American students to come here and study, especially considering the lack of job on graduation in the UK.
    I was under the impression that international (i.e. non-EU) fees were unrestricted already.
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    (Original post by alex_hk90)
    I was under the impression that international (i.e. non-EU) fees were unrestricted already.
    Yep that's right. But if you study in US you're pretty much guaranteed a job. Whereas here you're not, but you can live here. I don't know how to explain but it has to do with work permit/visa.
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    Here's the official position from the Council of Mortgage Lenders (according to Vince Cable): http://twitpic.com/3ead3g#

    (Original post by yawn)
    If you want to put your head in the sand and ignore the ominous rumblings then that's up to you, although of course, you won't be affected by it anyway...or maybe you will since the anecdotal evidence of two couples so far is that those who have graduated in the past and near times are being caught up in it too.
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    I'm not being funny, but it's people like you who are making this such a big deal! Having a student loan will NOT have any impact on your ability to get any other loan, including a mortgage!
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    (Original post by Gemma :)!)
    I'm not being funny, but it's people like you who are making this such a big deal! Having a student loan will NOT have any impact on your ability to get any other loan, including a mortgage!
    How can it not play into the affordability assessment?

    Surely all other things being equal a candidate for a mortgage will have a weaker affordability assessment if they are in student loan repayment?
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    (Original post by alex_hk90)
    Here's the official position from the Council of Mortgage Lenders (according to Vince Cable): http://twitpic.com/3ead3g#
    Thanks for this link, alex. It is difficult to read because when I rotated it to the left, it was obliterated by an advert that I couldn't close! Urgggh...:mad:

    Anyway, I read it sideways...and for the benefit of other readers I have typed out the main part of interest...by the way, it's a reply from the Council of Money Lenders (CML) to Vince Cable's enquiry.

    Currently student loans are paid at source via PAYE, after tax.

    This will reduce the individual's net income and will in turn reduce the amount of income that can be used to service a mortgage.

    Therefore, a student's loan is very unlikely to materially impact an individual's ability to get a mortgage, but the reduction in net income is likely to result in a commensurate reduction in the amount the lender is willing to lend them.
    It corroborates both the view of the 6th Head I spoke of in an earlier post and the comments from those who have shared their experience of this happening to them in the media...again, quoted by me. Post #141 refers.

    And the coalition has not breathed a word of this in their media briefings...the title of the thread is most apt, sadly.
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    (Original post by yawn)
    Thanks for this link, alex. It is difficult to read because when I rotated it to the left, it was obliterated by an advert that I couldn't close! Urgggh...:mad:
    You should use Adblock Plus - I don't have any adverts at all on that page. :nah:

    (Original post by yawn)
    It corroborates both the view of the 6th Head I spoke of in an earlier post and the comments from those who have shared their experience of this happening to them in the media...again, quoted by me. Post #141 refers.

    And the coalition has not breathed a word of this in their media briefings...the title of the thread is most apt, sadly.
    Again, I have to disagree. The coalition doesn't need to tell uni students that net income is used in mortgage applications because that has always been the case. The increase of the threshold for student loan repayments from £15,000 to £21,000 means that in the earlier years of repayment, net income will be higher under the new system. What is true is that it will be lower in the later years due to it taking longer to pay back the larger loan. The overall effect is therefore somewhat ambiguous, as if you apply for a mortgage in the early years of repayment you'd probably have a better chance than you currently do, while if you apply in the later years you will have a worse chance (but this is just because you're still paying off the loan, not because of the amount of the loan per se).
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    (Original post by Quady)
    How can it not play into the affordability assessment?

    Surely all other things being equal a candidate for a mortgage will have a weaker affordability assessment if they are in student loan repayment?
    Because the amount is so negligable?

    I may be wrong, but as I stated earlier in the thread, I don't think the student loan repayment is considered as part of your weekly/monthly 'expenses' when assesing your suitability for credit. Instead as it is already minused on your payslip, they just take your 'net income' as the starting figure (after NI, Student Loan, Tax).
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    (Original post by pothead1)
    Because the amount is so negligable?

    I may be wrong, but as I stated earlier in the thread, I don't think the student loan repayment is considered as part of your weekly/monthly 'expenses' when assesing your suitability for credit. Instead as it is already minused on your payslip, they just take your 'net income' as the starting figure (after NI, Student Loan, Tax).
    £115/month is negligible?

    So it is taken into account then...?
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    (Original post by Quady)
    £115/month is negligible?

    So it is taken into account then...?
    Wow.. I didn't know it was that significant.

    I was always under the impression it was a really small amount, I guess its my own fault for not checking it out myself. (I was told it was around £10 - 20 a week.)

    Where did you get this figure from?
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    (Original post by pothead1)
    Wow.. I didn't know it was that significant.

    I was always under the impression it was a really small amount, I guess its my own fault for not checking it out myself. (I was told it was around £10 - 20 a week.)

    Where did you get this figure from?
    Lets be honest £20/week is £87/month - hardly that different.

    I get the figure from my pay slip.
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    (Original post by Quady)
    Lets be honest £20/week is £87/month - hardly that different.

    I get the figure from my pay slip.
    I just watched the Lib Dem guy on QT, literally 30 seconds ago - say that someone on £21k - £27k would only pay back £7 a week (might have been a month actually??). I know he is referring to the new system, but he said on the old system he/she would pay back £45~ a month?
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    (Original post by pothead1)
    I just watched the Lib Dem guy on QT, literally 30 seconds ago - say that someone on £21k - £27k would only pay back £7 a week (might have been a month actually??). I know he is referring to the new system, but he said on the old system he/she would pay back £45~ a month?
    Can you explain to me how a £6,000 range its defined to the nearest fiver? Surely that should ring alarm bells

    Current system £21,000, £45 repayment a month
    ((21000-15000)*0.09)/12
    Current system £27,000, £90 repayment a month
    ((27000-15000)*0.09)/12

    £7/month on the new system would equate to £21,933 a month
    21000+((7/0.09)*12)

    Hasn't the penny dropped yet that politicians don't make things sound as they are in reality...?
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    (Original post by pothead1)
    I just watched the Lib Dem guy on QT, literally 30 seconds ago - say that someone on £21k - £27k would only pay back £7 a week (might have been a month actually??). I know he is referring to the new system, but he said on the old system he/she would pay back £45~ a month?
    New system (when earning £27,000 a year): £27,000 - £21,000 = £6,000. £6,000 * 0.09 = £540. £540 / 12 = £45 a month.
    Old system (when earning £27,000 a year): £27,000 - £15,000 = £12,000. £12,000 *0.09 = £1080. £1080 / 12 = £90 a month.

    Obviously both figures will be less when earning somewhere between £21,000 (£0 a month in the new system, £45 a month in the old) and £27,000 (as above).
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    (Original post by alex_hk90)
    New system (when earning £27,000 a year): £27,000 - £21,000 = £6,000. £6,000 * 0.09 = £540. £540 / 12 = £45 a month.
    Old system (when earning £27,000 a year): £27,000 - £15,000 = £12,000. £12,000 *0.09 = £1080. £1080 / 12 = £90 a month.

    Obviously both figures will be less when earning somewhere between £21,000 (£0 a month in the new system, £45 a month in the old) and £27,000 (as above).
    All figures are lower under the new system.
 
 
 
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